Barnes & Noble Education, Inc. Q1 FY2024 earnings call

• Operational Improvement: Retail sales grew despite operating 117 fewer stores. Gross comparable store sales were up 5.9% due to strength in course materials, supply products, and graduation items. Selling and administrative expense as a percent of revenue decreased by 520 basis points to 28.2% from 33.4% in the prior year period, a result of fiscal 2023 cost restructuring activities that reduced selling and administrative expense by $9.8 million quarterly year-over-year. - First Day Complete Initiative: Revenue increased 55% year-over-year, and First Day by course revenue grew 27%. 157 campus stores use the model, enrolling nearly 800,000 students, a 46% increase from fall 2022. FDC billings for the fall term are expected to be up over 46%. The program has positively impacted the student experience, with investments in proprietary software and MBS for fulfillment and logistics.

Retail: First quarter total revenue was $245.5 million, an increase of $9 million or 3.8%. Course material revenue grew 8.4%, and First Day and First Day Complete revenues increased 37%. Retail gross profit was $50.3 million, a decrease of $3.7 million or 6.9%, with a gross margin of 20.5% (down 230 basis points from prior year). Retail EBITDA was negative $18.9 million, an increase of $6.1 million. Wholesale: First quarter sales were $38.8 million, an increase of $1.7 million or 4.6%. Wholesale gross profit was $5.8 million (14.9% of sales) compared to $6.9 million (18.6% of sales) in the prior year. Wholesale non-GAAP adjusted EBITDA was $2.4 million, down $360,000.

• Maintaining fiscal 2024 adjusted EBITDA expectation of approximately $40 million. While inventory delays in the first two weeks of fall rush led to lower sales than expected, current and expected First Day sales and disciplined cost management will limit the financial impact of the delayed inventory receipts.

• Inventory delays occurred due to payables from the amend and extend of credit facilities, initially affecting some general merchandise categories, but course materials were prioritized and vendors reacted swiftly to release inventory.

Q: How has general merchandise sales been impacted by fewer stores and what's driving merchandise sales increase?

A: More students are coming into stores due to First Day Complete, providing opportunities for cross-merchandising. Graduation products performed better than expected in the first quarter, contributing to general merchandise growth, along with strong merchandising efforts.